National Association of Securities Dealers Chairman Robert Glauber says the self-regulatory organization wants to change the way annuities are regulated.
Glauber told attendees at an enforcement conference organized by the North American Securities Administrators Association, Washington, that fixed annuities, variable annuities and equity-indexed annuities are really “three versions of the same product” and ought to be subject to the same marketing rules.
The NASD is working with Minnesota Commerce Commissioner Glenn Wilson to bring the parties involved in annuity regulation together for a summit conference that would look at ways to harmonize the rules, Glauber said, according to a prepared version of his speech.
The goal of the conference should be to level the investor protection playing field among and between fixed annuity, variable annuity and equity-indexed annuity products, Glauber said.
Today, he continued, annuities are particularly troublesome from a regulatory standpoint.
The NASD and state securities regulators have jurisdiction over variable annuities, state insurance regulators normally have jurisdiction over fixed annuities, “and jurisdiction over equity-indexed annuity sales is essentially a jump ball, because it isn’t clear whether they’re securities, insurance products or something in between,” Glauber said.
Consumers have “every right to expect the same degree of protection when they buy what they think is the same product,” Glauber said.
The NASD, the SEC and state securities regulators have worked hard to clean up variable annuity sales practices over the past few years, “but fixed annuity investors generally don’t enjoy this level of protection,” Glauber said. “Unfortunately, when we clean up sales practices in one investment product, sales activity increases in similar products with less investor protection.”
The NASD has urged its 5,200 member firms to treat equity-indexed annuities as securities, even though the U.S. Securities and Exchange Commission has not determined whether they are, Glauber explained.
He noted that the NASD already handles some cases involving fixed annuities, such as instances of brokers persuading risk-averse retirees to exchange fixed annuities for far more volatile variable annuities.